Commerce ministry, PPRA oppose oil credit facility

Says Petroleum Division has not taken their input on the proposal


Zafar Bhutta January 16, 2019
The PSO board of directors has cleared the draft of the proposed deal and has requested the government to waive PPRA rules for the import of petroleum products from Azerbaijan. PHOTO: FILE

ISLAMABAD: The Ministry of Commerce and the Public Procurement Regulatory Authority (PPRA) have opposed a proposal that will allow the state-run Pakistan State Oil (PSO) to sign an oil credit facility with Azerbaijan.

The Pakistan Muslim League-Nawaz (PML-N) government had signed an inter-governmental agreement with Azerbaijan and nominated PSO for inking a deal with Azerbaijan’s Socar for a credit facility of $100 million without involving government guarantees.

Officials said the Petroleum Division tabled a proposal before the Economic Coordination Committee (ECC) in a meeting held on January 1, but the commerce ministry and the PPRA countered that the proposal had not been discussed with them. Following their objection, the ECC put off decision on the matter.

The Azerbaijan’s oil credit facility will open avenues for oil and gas import from the Central Asian states, which will lessen Pakistan’s excessive reliance on Middle Eastern countries. At present, Pakistan is importing oil from the Gulf countries including the United Arab Emirates (UAE), Kuwait and Saudi Arabia. To meet its gas needs, it is purchasing the commodity from another Gulf country, Qatar.

Pakistan hopes to secure $3.2b oil credit facility

Owing to its fast depleting foreign exchange reserves, Pakistan had also sought an extension in the oil credit facility from Saudi Arabia and the UAE. Azerbaijan has offered Pakistan an open credit line of $100 million for the purchase of petroleum products without any sovereign guarantees, an offer, though small, will help ease some pressure on Pakistan’s fast dwindling foreign currency reserves.

Officials said Azerbaijan had offered to export crude oil, refined petroleum products and LNG to Pakistan on credit for three months.

The Azerbaijan government has nominated state-run Socar and Pakistan has designated PSO for signing a commercial deal in this regard. However, the proposal has been a victim of bureaucratic hurdles. The Petroleum Division is required to seek the ECC’s approval for avoiding PPRA rules in order to pave the way for a government-to-government deal with Azerbaijan.

The PSO board of directors has cleared the draft of the proposed deal and has requested the government to waive PPRA rules for the import of petroleum products from Azerbaijan.

PM Imran looks to secure LNG on credit from Qatar

Socar’s activities include exploration of oil and gas, production, processing and transportation of oil, natural gas and gas condensate as well as marketing of petroleum and petrochemical products in domestic and international markets. It also operates a wide network of petrol stations in Ukraine, Romania, Georgia, Switzerland and Azerbaijan under its brand name.

Azerbaijan’s daily production of crude oil is approximately 860,000 barrels per day (bpd) and its annual gas production is approximately 29.4 billion cubic feet. This makes Socar a predominant player in its core region as well as an invaluable trade partner in the global market.

It has also expressed interest in constructing a terminal as well as LNG and liquefied petroleum gas (LPG) storages in joint venture with a Pakistan-designated company.

In the sixth session of Pakistan-Azerbaijan Joint Economic Commission held in April 2016, both sides agreed to promote investment opportunities in the energy sector including exploration and production of oil and its products, broaden cooperation for the supply of crude oil and its products and set up an LNG and LPG terminal in a joint venture between nominated enterprises of the two countries.

Published in The Express Tribune, January 16th, 2019.

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